Air Link Communication Ltd (AIRLINK) reported a consolidated NPAT of PKR0.5bn (EPS: PKR1.35) for 3QFY25, marking a decline of 48% YoY and 64% QoQ, primarily due to lower sales volumes. The result fell short of our estimated EPS of PKR 2.2/share, largely due to higher-than-expected finance costs and an elevated effective tax rate. Cumulatively, earnings for 9mfy25 totalled PKR2.9 billion (EPS: PKR7.22), representing a 7% year-over-year decline.

Key highlights for 3QFY25:

§  Net sales came in at PKR28.2bn, down 12% YoY and 20% QoQ. This was higher than expected, likely supported by the launch of the higher-priced Xiaomi 15 series. The overall decline in sales was driven by a reduction in the volumes of locally manufactured phones during the quarter.

§  Gross margins improved to 10.4%, up 0.5ppt YoY and 1.2ppt QoQ, supported by a favourable sales mix following the launch of the Xiaomi 15 series and a likely contribution from TV sales, though the latter remained limited.

§  Other income declined 43% YoY, more than expected, primarily due to lower cash balances. Meanwhile, finance costs rose 65% year-over-year (Yoy) to PKR 1.4 billion, driven by increased short-term borrowings amid working capital constraints.

§  The effective tax rate rose to 39% in 3QFY25, compared to 22% last quarter, as the tax benefit associated with local manufacturing came to an end.

AIRLINK has posted a disappointing result for 3QFY25, largely due to a decline in mobile phone volumes. Looking ahead, potential catalysts include growth in Smart TV sales and the anticipated launch of Acer laptops. We also await clarity on the upcoming export policy, which could provide further upside. While the weakness in mobile phone sales remains a key concern, the impact was partly seasonal, affected by fewer working days in February and the Ramzan holidays. We maintain our Buy stance on the stock with a target price of PKR260/sh.

Courtesy – IMS Research